There has been a considerable amount of debate going on about the Obama administrationÕs decision to give more financial regulatory powers to the Fed. Before a clean chit is handed to the Fed, a thorough examination of relations between Fed and Goldman Sachs is definitely in order.

Many of the Fed presidents have served in one capacity or the other at the Goldman. There were questions raised over the decision to give bank status to Goldman which died due to lack of required follow up. It has been 9 months since Goldman got the status but you wonÕt find a single retail banking branch of Goldman. The Fed took less than 24 hrs to take the decision but never cared to make sure that Goldman follows up the guidelines required to be fulfilled by any bank. As a result of the decision, Goldman got access to TARP funds of around $10 billion and TALF funds of $ 5 billion. The bank is yet to go out of the TALF program and has already started to talk about giving record bonuses to its employees.

There are sections within the financial circles that say the bank needs to be encouraged for making money at a time when the whole sector is going bust. While that stands true, one has to keep in mind the money being used for the purpose is public and the securities written down by government under these funds were underwritten by Goldman Sachs.

The argument that Goldman is working for its investors also does not hold water. Goldman got the government backed TARP funds at 5% interest rate whereas the Warren Buffet funds came at 10% interest rates. As per business common sense, the company should pay the higher interest rate loan first, but Goldman did just the opposite because it wanted to pay record bonuses to its employees.

LetÕs talk about the connections Goldman has in high places. New York Times says the Treasury Secretary Henry Paulson talked to the Goldman Boss Lloyd Blankfein, two dozen times in the September week. That was the time when he was taking a decision on bailing out troubled insurer AIG. That's quite an abnormal figure for routine conversations.

Paulson has once served as the chief executive at Goldman for eight years, and critics say if the government had not bailed out AIG, Goldman would have gone bust. The decisions that came from Paulson, could be easily termed as inconsistent. He allowed Lehman Brothers to collapse, whereas he helped Bear Sterns and AIG survive.

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